management and control systems
TRANSCRIPT
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Management and control systems
Trainer : Dermot Byrne
Head of Authority ERDF Audit Authority, Ireland
Brussels – September 2014
This training has been organised by EIPA-Ecorys-PwC under the Framework Contract Nr 2013.CE.16 B.AT 044. The opinions expressed are those of the contractor only
and do not represent the EC's official position
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Contents of Presentation
• Architecture of management and control systems
• General principles and functions of authorities (CA, MA, AA)
• Re-inforced accountability of the MA
• Delegation of functions to the IB
• Monitoring Designation process
• Implications of E-Cohesion
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European Regions 2007-2013
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European Regions 2014-2020
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Assurance Model 2007-2013
Ex post
During implementation
Ex ante
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Assurance model 2014-2020
Commission audits and supervision
acceptance of accounts &
financial correction
National audits, audit opinion on accounts / ACR
'Certification' of expenditure and Certified Annual Accounts
Management verifications, Management Declaration and Annual
Summary of controls and audits
Designation procedure
Guarantees in programme negotiations and ex-ante conditionalities
During implementation
Ex-ante
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Cascade Structure – key functions
Certifying
Authority
Intermediate
Body
Managing
Authority
Beneficiary Body receiving EU aid
Annual accounts, certification of expenditure, IT system
Manage OP, Verify delivery, Declaration, Anti-fraud measures
Functions delegated by MA or CA
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Management & Control / Audit
Certifying
Authority
Intermediate
Body
Audit
Authority
Managing
Authority
Beneficiary
AUDIT MANAGEMENT & CONTROL SYSTEMS
Financial
controls
including
Management
Verifications
Systems
Audit
Operations
audit EX-POST
(after EU claim)
EX-ANTE
(before EU claim)
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Key functions - Managing Authority (1) (Article 125 CPR)
• MA responsible for managing and implementing OP with “sound financial control”
• Ensure operations are selected for funding based on OP criteria • Projects comply with Community and National rules
• Verify that co-financed products/services are delivered • Expenditure declared by beneficiaries has actually been incurred • On-the-spot (management) verifications may be carried out on a sample
basis
• Ensure there is a system to record/store accounting records for each project • Collect information on financial management, monitoring, verifications,
evaluation and audit.
• Draw up and submit annual & final reports on implementation
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Key functions of Managing Authority(2) (Article 125 CPR)
New requirements
• Effective and proportionate anti-fraud measures
• Drawing up a management declaration on the functioning of the systems, legality and regularity of transactions and sound financial management
• Drawing up an annual summary of final audit reports and verifications and controls carried out, analysis of nature of errors and corrective actions taken or to be taken
• Report to EC by 15th February each year (Art.59(5)(b) Financial Regulation)
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Key functions of Managing Authority(3)
Management Declaration: (Article 59 (5) of FR)
• Information is properly presented, complete and accurate
• Expenditure was used for intended purpose, as defined in rules
• Control systems give necessary guarantee re legality and regularity of transactions
• Management Declaration made available to AA at least 30 days before submission to Commission
• Effective anti-fraud measures
Why?
To increase accountability of MA for an effective M&C System
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Key functions - Certifying authority (1) (Article 126 CPR)
Submitting payment applications to Commission, certifying; • that these are based on reliable accounting systems, • verifiable supporting documents, and, • are subject of management verifications Drawing up the accounts (New) • Certifying the completeness, accuracy and veracity of the accounts, and, • compliance of expenditure with applicable law defined by EU and
national rules
• Ensuring existence of computerized accounting records for each operation which included amounts • withdrawn, • recovered, • recoverable • irrecoverable
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Key functions - Certifying authority (2) (Article 126 CPR)
Ensuring, for purpose of drawing up and submitting payment applications;
• It has received adequate information from Managing Authority (MA) re procedures and verifications carried out in relation to expenditure
• It has taken account of results of all audits carried out by, or for, AA
• Maintaining in computerised form, accounting records of expenditure declared and corresponding public contribution paid to beneficiaries
• Ensure amounts recovered are repaid to budget of the Union prior to closure by deducting from subsequent statements of expenditure.
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Key controls - Management & Control System
Organisation Personnel
Accounting Authorisation
& approval
Physical Management
Separation Supervision
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Management verifications
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Designation - general objectives
• Stronger accountability at MS level:
• Timely and improved verifications (MA) reflected in
management declaration
• Strict supervision over Intermediate Bodies (Article 123 (6,7) CPR)
• Certified accounts after deduction of all irregular expenditure or at risk (CA)
• Emphasis on ESIF effectiveness & performance
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Designation of Authorities
Purpose
• Ex-ante assurance on set-up and design of the management & control system (MCS);
• Confirm that MCS for MA/CA give reasonable assurance that they are in a position to fulfil their responsibilities for the OP;
• Building on audit and control work carried out under previous period:
• Member States encouraged to retain the current systems (MAs CA & IBs) where working well (e.g. low error rates, systems assessed in categories 1 and 2, & Art. 73(3) of Regulation 1083/2006 granted to operational programme).
• A “Readiness Assessment” of system design at a point in time
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Procedure for designation of MA/CA
Notification of the Designation Decision (Art.124 CPR)
• MS to notify the date & form of designations, at appropriate level of MS
• Prior to the submission of the first application of interim payments
• based on a report and opinion by the Independent Audit Body (IAB), possibly AA
• assessing fulfilment of designation criteria
• Commission might request these documents based on a risk assessment:
– whether MCS is similar to 2007-2013,
– current MCS effectively functioning,
– if the MA and CA functions have been newly combined …
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Designation - General principles (Art 72 CPR)
• Provides for a description of the functions of each body involved in management and control
• Allocation of functions within each body
• Separation of functions between and within bodies
• Procedures for correctness and regularity of expenditure
• Computerised systems for financial data and data on indicators
• Monitoring and reporting where MA/CA tasks are entrusted to other body
• Audit on functioning of systems, adequate audit trail
• Prevention, detection and correction of irregularities and fraud
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Designation of authorities Designation of MA, CA and possibily their IBs and AA for each OP,
• Same MA/CA/AA can be designated for several OPs
• MA can also carry out CA functions
• AA can be in the same public authority/body as MA for OPs > €250m, only if:
• Art. 73(3) of Regulation 1083/2006 granted (reliance on AA 2007-2013), or
• On the basis of 2007-2013 period, EC is satisfied institutional organisation and accountability of the AA guarantee its functional independence and reliability
• Coordinating body may be designated by MS to liaise with the EC, co-ordinate designated bodies and promote harmonised application of Union rules (MS initiative)
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Designation Criteria (1) (Annex XIII of CPR)
Main Headings
1. Internal Control environment
2. Risk management
3. Management and control activities (MA and CA)
4. Monitoring (MA and CA)
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Designation Criteria (2) (Annex XIII of CPR)
1. Internal Control environment
i. Organisational structure / allocation & separation of functions within MA & CA
ii. Framework for delegation of tasks to Ibs / definition of respective responsibilities and obligations, verification of capacity, reporting procedures
iii. Reporting and monitoring procedures for irregularities & recoveries
iv. Plan for allocation of appropriate staff with technical skills at all levels
2. Risk management
On basis of proportionality, a framework for risk management exercises where necessary, particularly, where operations modified
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Designation Criteria (3) (Annex XIII of CPR)
3. Management & Control Activities
A. Managing Authority – procedures to ensure:
i. grant applications / appraisal / selection / instructions and guidance to beneficiaries (Article 125(3)).
ii. management verifications (administrative & on-the-spot)
iii. applications for reimbursement by beneficiaries
iv. computerised system to collect, record and store data on each operation / participants / indicators / with appropriate security
v. beneficiaries maintain separate/adequate a/c code
vi. proportionate anti-fraud measures.
vii. adequate audit trail
viii. Management declaration of assurance / reports on controls / annual summary
ix. Beneficiary receives document setting out conditions for support
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Designation Criteria (4) (Annex XIII of CPR)
3. Management & Control Activities
B. Certifying Authority – procedures for:
i. Certifying interim payment applications to Commission
ii. Drawing up accounts / certify true, complete, accurate / legal compliance
iii. Adequate audit trail & accounting records in computerized form – including amounts recoverable, recovered, withdrawn for each operation.
iv. CA receives adequate information from MA re verifications carried out & results of audits by AA
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Designation Criteria (5) (Annex XIII of CPR)
4. Monitoring
A. Managing Authority – procedures to;
i. Support work of Monitoring Committee
ii. Draw up and submit annual and final implementation reports
B. Certifying Authority – procedures to;
• Ensure fulfillment of responsibilities to monitor results of MV’s & AA audits
• Prior to submitting payment application to Commission
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Designation of Intermediate Bodies (Article 123 (6,7) CPR)
• MS may designate one or more intermediate bodies
• To carry out certain tasks of the MA or CA under the responsibility of that Authority.
• Relevant arrangements between MA/CA and IB formally recorded in writing.
• MA may entrust the management of part of OP to an IB
• Agreement in writing between IB and MS or MA (a 'global grant').
• IB must provide guarantees of;
– its solvency / competence in area concerned
– administrative and financial management capacity.
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Key functions - Audit authority (1)
• As IAB, give an Audit Opinion on designation of CA, MA
(similar to systems compliance of 07-13)
• Prepare an audit strategy (as before)
• Carry out audits on systems (as before)
• Select sample in reference to the accounting year (July n-1 to June n)
• Carry out audits on operations (as before)
• Carry out audits of the accounts certified by CA (new)
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Key functions - Audit authority (2)
Report to EC by 15th February each year,
• providing a control report and audit opinion on accounts (new)
• legality and regularity of expenditure
• effective functioning of MCS
• statement - whether the audit work puts in doubt the assertions made in the management declaration
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Key functions - Audit Authority (3)
Audit of Annual Accounts To provide reasonable assurance on amounts declared in Accounts:
Completeness Accuracy Veracity (true)
Based largely on audits of operations, and, systems audits in CA “True and Fair” view:
Expenditure in a/cs reconciles with actual expenditure and payment applications
Amounts withdrawn and recovered, to be recovered, recoverable in a/cs = amounts in CA accounting system and corresponding financial corrections
Expenditure excluded from a/cs due to on-going assessment (legal and regular)
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Audit structure European Court of
Auditors (ECA)
European
Commission
DG Audit
Certifying
Authority
Intermediate
Body
Audit Authority
Managing
Authority
Systems audits
Operations audits
Independent audit of
Audit Authority Beneficiary
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e-Cohesion – implications (1)
E-Cohesion – what is it? • Electronic exchange of information between beneficiaries and
programme bodies (Article 112 of CPR)
• Why? To simplify and streamline implementation
• How? • After signing of subsidy/grant contract it covers:
• Reports on progress • Declarations of expenditure • Management verifications • Audits • Can extend to electronic submission of project applications
(MS option) • Deadline for implementation – end of 2015
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e-Cohesion – implications (2)
Benefits of e-Cohesion
• Data integrity and confidentiality
• Authentication of sender
• Storage / availability of documents (Article 140 of CPR)
MA/IB • Reliance on e-documents for management verification (desk checks) • Electronic check lists recorded on system
AA • May use data to plan and prepare for audits of operations
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QUESTIONS?
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